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PIR saves millions in .org rebid

And sticks with its previous backend operator

The non-profit that runs all .org domains and provides the bulk of the funding for the Internet Society and Internet Engineering Task Force has just saved itself millions of dollars a year.

Public Interest Registry (PIR)
announced
Monday that it had re-selected Afilias as its backend operator after a nine-month retendering process. Afilias does all the hard work of adding, removing and transferring .org domains and charges PIR just over $33m a year, or around $3 per domain, to do so.

Both PIR and Afilias declined to provide details of the new contract, but industry insiders expect it to come out at approximately $2 per domain – a savings of around $10m for PIR.

PIR has not said what it will do with the expected extra funds. It currently makes $80m a year running .org, and of that pays $30m to Afilias and gives $30m to the Internet Society (ISOC) in the form of a grant – which makes up the bulk of ISOC's annual $50m revenue. ISOC in turn funds the IETF.

It's not known if PIR will simply increase the amount it grants to ISOC or use the funds to pursue its own goals, including the two new internet extensions it now runs – .ngo and .ong, standing for "non-governmental organization."

Changes

Afilias has run the .org backend since 2002, but in the past two years there have been enormous changes in the registry market with the release of over 1,000 new internet extensions. As part of that change, combined with technological improvements over the past 15 years, the cost of running registry operations has fallen significantly.

Although the market remains small and hence largely opaque, some backend operators are known to offer their services for as little as $1 per domain.

Thanks to its long online existence and the widespread use of the .org extension, PIR is shielded to a certain degree from the increasingly competitive domain name market. As such, it noted in its retendering
announcement
in February that price was not going to be the only factor in its decision:

"The organisation desires to contract with a qualified backend registry services provider that shares a similar reputation and holds itself to the highest operational and ethical standards. The selected backend registry service provider should be a 'valued business partner' – an organisation that combines outstanding qualifications in service delivery with the ability to engage Public Interest Registry in a business relationship that seeks strategic and innovative approaches to enhance the capability and efficiency of service delivery."

Few expected PIR to go with a different company, and many suspected it was a clever negotiating tactic by CEO Brian Cute to get the price down. Despite that, PIR said it received and evaluated "more than 20 potential service providers representing 15 countries."

"Afilias was selected as the best value solution based on the objective criteria and requirements set forth in Public Interest Registry's procurement process," the company said in a statement. "It is anticipated that Afilias will commence operations under the new contractual agreement on Jan 1, 2018."

Market forces

Although PIR is relatively insulated from the changing market, Afilias is not. The reduction in the size of the PIR cash-cow means that the privately held company is more exposed than ever to the market.

And that market is getting meaner: last month, Afilias chair Jonathan Robinson went public with the company's concerns that a recent
high-profile and controversial auction win
for the new ".web" internet address was an effort by dot-com operator Verisign to restrict competition.

Afilias was outbid for .web by an unknown company called Nu Dot Co which paid $135m – three times the previous record ($45m for .shop). Other bidders, including Afilias, had asked domain name overseer ICANN to halt the auction over the question of who was behind Nu Dot Co, but ICANN refused. It was then sued, but a temporary restraining order on the auction was denied.

Almost immediately after Nu Dot Co's win, Verisign
revealed
that it has provided the funds for the extraordinary purchase. Robinson is not impressed. "If ICANN permits the auction result to stand, it may not only invite further flouting of its rules – it will grant the new TLD with the highest potential to the only entity with a dominant market position," he wrote in a blog post.

"This would diminish competition and consumer choice and directly contradict ICANN's values and Bylaws. The ICANN board and, under its direction, ICANN itself, can stand up for competition and consumer choice by disqualifying the NuDotCo application."

Since then, Afilias' general counsel has asked ICANN to
cancel the auction result
[PDF], and another large registry operator, Donuts, has filed for an independent review of the process. ICANN has put .web on hold until that process plays out. Verisign has called
opposition to its proxy win by competitors "baseless aspersions for their own self-interest."

This time last year, Afilias
announced plans
to go public on the London Stock Exchange, offering a third of its shares for $100m – valuing itself at four times revenue. But just three months it later cancelled the plan over "market conditions." ®